A medical-legal consulting firm has engaged in substantial advertising involving the
use of contingent fee contracts wherein the firm enters into a contingent contract with a
particular plaintiff and in return provides various services including the providing of
expert testimony.

Question

Does the Texas Code of Professional Responsibility, specifically DR
7-109(C), prohibit an attorney from participating in or recommending
that a client enter into a contingency fee agreement with a medical-legal consulting firm?

Discussion

There are four basic issues which must be considered in light of the Texas Code of
Professional Responsibility. First, is the contingent fee agreement a mere subterfuge for
fee splitting with non-lawyers? Second, is the attorney giving up complete or partial
control of the case? Third, does the contingency contract result in the payment of
excessive fees by the client? And fourth, does the contract result in the payment of a
contingent fee to a witness in exchange for his or her testimony?

Opinions from various jurisdictions, while showing that a slight majority of states
allow such contracts, tend to fall on two sides of a very narrow line. Those jurisdictions
allowing such contracts do so hesitantly, expressing concern over possible violations of
the Code of Professional Responsibility. Such seems to be the rule in Indiana (Opinion one
of 1981); Arizona (Opinion 84-9), and Connecticut, (Informal Opinion 82-7). The ABA
Informal Opinion 1375 (1976) is fairly representative in this area. The ABA would allow
such an arrangement so long as:

"(1) the lay person or agency (medical-legal consulting service and experts
provided by the same) is not to engage in the unauthorized practice of law, DR 3-101(A); (2) the lawyer does not share legal fees
with the lay person or agency, DR 3-102(A)(1)(3); and
(3) the contingent fee is not payable for the testimony of the lay person or agency, DR 7-109(C)."

All of the jurisdictions which allow such fee arrangements have expressed similar
reservations for attorneys who recommend or participate in such arrangements. These states
see these as potential violations and not as violations per se. These states seem to have
come to the conclusion that with careful contracting and diligence on behalf of the
attorney in maintaining control of the case, ethical violations can be avoided.

Other states, however, have seen these problems as too serious to be completely
avoided. In Opinion 5-72 of the New York State Bar Association Committee on Professional
Ethics, the Committee concluded that there were serious ethical problems in relation to
the 20-30 percent contingent fee in addition to the attorneys contingent fee. This was
especially true in light of the fact that the consulting firm performs many of the
functions normally done by the attorney for his or her fee alone.

But the most troubling problem in this area comes in light of DR7-109(C) which states:

"A lawyer shall not pay, offer to pay, or acquiesce in the payment of compensation
to a witness contingent upon the content of his testimony or the outcome of the case. But
a lawyer may advance, guarantee, or acquiesce in the payment of:

(1) Expenses reasonably incurred by a witness in attending or testifying;

(2) Reasonable compensation to a witness for his loss of time in attending or
testifying;

(3) A reasonable fee for the professional services of an expert."

In Idaho Formal Opinion 104, the ethics committee found that the paying of a contingent
fee to a "finder" was the functional equivalent of paying a contingent fee to a
witness. There does exist a financial incentive to influence the testimony of the
witnesses provided. Idaho found these contingent fee contracts to violate DR 7-109(C) and
therefore prohibited attorneys from participating in or recommending such contracts.

Conclusion

Several states have heeded the warnings of other states and have held such contingent
fee arrangements to be unethical. Beyond the problem presented in the areas of (1) fee
splitting, (2) excessive fees, (3) loss of attorney control, (4) preventing the
unauthorized practice of law (not dealt with by this committee), and (5) payment of
contingent fees in exchange for expert testimony, the entire arrangement gives the
appearance of impropriety.

Thus, an attorney who aids, assists, or permits a client to enter into such a contract
violates DR 7-109(C). It would seem to be the only
logical conclusion available, that when you pay a fee based on a percentage of the
recovery to a consulting firm providing expert witnesses, in essence you are paying for
testimony. Theoretically, the better the testimony, the larger the recovery and hence, the
larger the fee to the witness. Under 7-28, "witnesses should always testify
truthfully and should be free from any financial inducements that might tempt them to do
otherwise."

This Committee does not offer an opinion on the legitimacy or enforceability of a
contract between a client and a medical-legal consulting firm. It merely addresses the
issue of an attorney's participation in such an agreement and the ethical implications
arising therefrom.